Conversion of a Public Company into Private Company and Vice-versa

A Public company goes private when a acquiring entity (e.g., private equity firm, management group) buys all publicly traded shares. This delists the company from stock exchanges, concentrating ownership with a small number of private investors. Primary motivations include escaping the high costs and regulatory scrutiny (e.g., Sarbanes-Oxley) of being public, and gaining freedom to execute long-term restructuring strategies away from quarterly market pressures.

Conversion of a Public Company into Private Company:

Procedure (Section 14 & Rules):

1. Board Meeting → Pass a resolution to alter Articles of Association (AOA) by inserting restrictive provisions (transfer of shares, limit on members, no public invitation).
2. Special Resolution → Pass at General Meeting with 75% majority to approve conversion.
3. Approval of Tribunal (NCLT) → Prior approval of National Company Law Tribunal is required.
4. Filing with ROC → File altered AOA, special resolution, and NCLT order with Registrar of Companies.
5. New Certificate of Incorporation → Issued by ROC, confirming conversion into a private company.

Key Point: Conversion does not affect existing liabilities, debts, or obligations of the company.

Conversion of a Private Company into Public Company:

A Private company goes public via an Initial Public Offering (IPO), issuing new shares to public investors on a stock exchange. This provides access to vast capital for growth, facilitates acquisitions using publicly traded stock, and enhances prestige and liquidity for early investors and founders, albeit with significantly increased regulatory compliance and reporting obligations.

Procedure (Section 14 and Rules):

1. Board Meeting → Pass a resolution for conversion.
2. Alter Articles of Association (AOA) → Remove restrictive clauses (limit on members, transfer restrictions, public subscription prohibition).
3. Special Resolution → Pass in General Meeting with 75% majority.
4. Filing with ROC → Submit altered AOA and special resolution with Registrar of Companies.
5. Fresh Certificate of Incorporation → ROC issues a new certificate recognizing the company as a public company.

Key Point: Minimum requirements for a public company (7 members, 3 directors, no restriction on shares, etc.) must be fulfilled.

✅ In Short:

• Public → Private → Needs NCLT approval.
• Private → Public → Only requires alteration of AOA & ROC approval.